![]() ![]() These costs are commonly referred to as PITI, which is derived from: pincipal, interest, tax & insurance.įER = PITI / (annual pre-tax salary / 12) The monthly mortgage payment includes principle, interest, property taxes, homeowner's insurance and any other fees that must be included. Most lenders do not want your monthly mortgage payment to exceed 28 percent of your gross monthly income. The housing expense, or front-end, ratio is determined by the amount of your gross income used to pay your monthly mortgage payment. ![]() Two criteria that mortgage lenders look at to understand how much you can afford are the housing expense ratio, known as the “front-end ratio,” and the total debt-to-income ratio, known as the “back-end ratio.” Front-End Ratio Both average and median home sizes were up 62% and that was before the COVID-19 crisis accelerated the work from home movement. By 2015 the average new house was 2,687 square feet and the median new house was 2,467 square feet. In 1973 the average new home was 1,660 square feet and the median new house was 1,525 square feet. Part of the real estate market appreciation has been homes becoming physically larger. residential real estate has appreciated about 5.4% per year in the United States. Over the longterm real estate generally appreciates only slightly better than the inflation rate across the broader economy. Those who are seeking investment returns will usually obtain higher returns in the stock market & stock investments are much more liquid & easier to sell than homes.
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